Culp(CULP) - 2025 Q2 - Quarterly Report

Financial Performance - Net sales for the three months ended October 27, 2024, were $55,674,000, a decrease of 3.6$58,725,000 for the same period in 2023[7]. - Gross profit for the three months ended October 27, 2024, was $5,990,000, down 24.6$7,950,000 in the prior year[7]. - Net loss for the three months ended October 27, 2024, was $5,644,000, compared to a net loss of$2,424,000 for the same period in 2023, representing an increase of 133.3%[7]. - For the six months ended October 27, 2024, net sales were $112,211,000, a decrease of 2.0$115,387,000 in the same period in 2023[9]. - The net loss for the six months ended October 27, 2024, was $12,905,000, compared to a net loss of$5,766,000 for the same period in 2023, indicating a 124.5% increase in losses[9]. - The company reported a comprehensive loss of $5,621,000 for the three months ended October 27, 2024, compared to a comprehensive loss of$2,506,000 for the same period in 2023[11]. Assets and Liabilities - Total current assets as of October 27, 2024, were $86,901,000, a decrease from$88,594,000 as of October 29, 2023[15]. - Total liabilities as of October 27, 2024, were $65,364,000, an increase from$58,532,000 as of October 29, 2023[15]. - Cash and cash equivalents as of October 27, 2024, were $10,531,000, down from$15,214,000 as of October 29, 2023[15]. - The total shareholders' equity as of October 27, 2024, was $63,623 thousand, down from$76,129 thousand as of April 28, 2024, reflecting a decline of 16%[21]. - Total assets decreased from $142.2 million on October 29, 2023, to$129.0 million on October 27, 2024, representing a decline of approximately 9.3%[132]. Cash Flow and Capital Expenditures - Cash flows used in operating activities were $2,633 thousand for the six months ended October 27, 2024, a decrease of 41$4,476 thousand for the same period in 2023[19]. - Capital expenditures for the six months ended October 27, 2024, were $1,578 thousand, down 20$1,972 thousand for the same period in 2023[19]. - Capital expenditures for the six months ending October 27, 2024, amounted to $1.8 million, down from$2.2 million in the same period of the previous year, representing a decrease of about 18.9%[140]. Restructuring and Operational Changes - The company reported a significant increase in non-cash restructuring expenses, which rose to $2,178 thousand for the six months ended October 27, 2024, compared to$379 thousand in the same period of 2023[19]. - The company expects restructuring charges of approximately $7.3 million for fiscal 2025, with$4.4 million expected to be cash expenditures[74]. - Restructuring charges related to the mattress fabrics segment are estimated at $7.2 million, including$2.7 million for relocating equipment and $1.3 million for employee termination benefits[75]. - The company recorded restructuring expenses of$2.8 million for the three-month period ending October 27, 2024, and $5.5 million for the six-month period[78]. - Culp Upholstery Fabrics Haiti, Ltd. discontinued the production of upholstery cut and sewn kits due to a decline in demand, which was more than previously anticipated[82]. Segment Performance - Net sales for the mattress fabrics segment decreased to$30.1 million for the three months ended October 27, 2024, compared to $31.4 million for the same period in 2023, representing a decline of 4.1$25.6 million for the three months ended October 27, 2024, down from $27.3 million in the prior year, a decrease of 6.3$6.8 million for the three months ended October 27, 2024, compared to $7.9 million for the same period in 2023, a decline of 14.1$2.6 million for the three months ended October 27, 2024, compared to a loss of $2.2 million for the same period in 2023[120]. Financing and Credit Facilities - The company has an asset-based revolving credit facility (ABL Facility) with a maximum principal amount of$35.0 million, which can be used for working capital and general corporate purposes[87]. - As of October 27, 2024, the available borrowings under the ABL Facility totaled $22.6 million, with no outstanding borrowings reported[97]. - The company entered into an unsecured credit agreement in RMB for a line of credit up to 29.0 million RMB ($4.1 million USD) effective March 20, 2024[99]. - A new credit agreement was established on November 5, 2024, providing borrowing capacity up to 35.0 million RMB ($4.9 million USD), with a working capital loan of 10.0 million RMB ($1.4 million USD) already utilized[99]. Tax and Deferred Income - The effective income tax rate for the six months ending October 27, 2024, was (1.5%), a significant decrease from (26.8%) for the same period in 2023[142]. - The company recorded a full valuation allowance against its U.S. net deferred income tax assets due to ongoing significant pre-tax losses[148]. - As of October 27, 2024, the total gross unrecognized income tax benefits amounted to $1.4 million, an increase from$1.2 million as of October 29, 2023[153]. Stock and Compensation - The fair value of performance-based restricted stock units expected to vest as of October 27, 2024, was $333,000[172]. - The company recorded compensation expense of$33,000 for performance-based restricted stock units for the six months ended October 27, 2024, compared to $23,000 for the same period in 2023[171]. - Time-based restricted stock units totaling 103,320 vested during the six-month period ending October 27, 2024, with a fair value of$581,000[175]. Legal and Compliance - The company is involved in legal proceedings but does not expect these actions to have a material adverse effect on its financial position[186].